Financial Q & A: Repatriating earned income and other money from China — follow the rules, avoid Illegal foreign exchange trading

In China, carrying out foreign exchange transactions outside of designated foreign exchange banks, the China Foreign Exchange Transaction Centre or its local branches is illegal. Foreign exchange in China is strictly regulated and any violation of regulations can be dan be deemed as a “disruption to the market” and result in criminal penalties.

Foreign individuals working in who wish to repatriate their taxed salary to their home-country bank account should fully understand both the procedure for repatriating one’s taxed salary and the relevant laws and regulations associated with such transaction to ensure proper compliance. In this post, we offer some Q&A on the basics of China foreign exchange.  

What are the principal laws and regulations governing individual foreign exchange?

The Administrative Measure on Individual Foreign Exchange (effective from 1 February 2007) and Implementation Regulations for Administrative Measures on Individual Foreign Exchange (effective 5 May 2007) are the principal regulations governing individual foreign exchange in China.

Which institutions can perform foreign exchange transactions for foreign individuals?

Banks are authorised to process individual purchase and sale of foreign currencies through a management information system designated by the State Administration of Foreign Exchanges and its branches.

What are the provisions for foreigners conducting non-commercial foreign exchange transactions?

Foreigners may conduct foreign exchange under the following conditions:

  • Where Renminbi (often referred as RMB or Yuan) income is lawfully received within China under the current account, foreign currency may be purchased and remitted abroad by a bank transfer with valid identification documents and other relevant proof documents on the transaction amount (including tax vouchers).

  • Where foreign currency has been remitted from an overseas account to a China-based account, the unused currency may be remitted back to the originating ‘home’ bank account based on valid identification documents.

  • Where unused Renminbi originally exchanged from foreign currency, and not exceeding the stipulated amount of USD $500, may be exchanged by banks or foreign exchange institutions. For any amount exceeding the stipulated amount, the exchange may be performed by banks based on the receipt of the original currency exchange.

What is the maximum amount of foreign exchange allowed for a foreign individual in a non-commercial transaction?

An equivalent to USD 10,000 or less per day is the cumulative amount of foreign currency allowed to be remitted overseas through a current account. If the amount exceeds this amount, the total amount shall be declared by completing the ‘Declaration Form of the Customs of the People’s Republic of China for Luggage and Articles of Inbound Tourists’. In this, providing the previous withdrawal slip for the cash in foreign currency from the originating financial institution in which the amount was previously deposited is also required.

An equivalent to USD 500 or less per day is allowed in converting unused Renminbi back to foreign currency. Foreign exchange can only be performed with the presentation of valid identification and the previous currency exchange memo (valid for 24 months from the date of the previous conversion).

An equivalent to USD 1,000 or less per day is allowed for converting unused Renminbi back to foreign currency on the premises outside the Customs of China and on the day before departing China.

What is considered illegal foreign exchange trading?

Selling and buying foreign exchange outside of the designated foreign exchange banks, the China Foreign Exchange Transaction Centre or its local branches is deemed as illegal foreign exchange trading and a criminal violation. Illegal foreign exchange trading also refers to re-selling foreign exchange or disguised foreign exchange trading, such as Person A paying Renminbi to Person B’s account and Person A receiving foreign currency in their foreign account from Person B’s foreign account.

What is considered a ‘serious’ criminal offence?

In the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues concerning the Application of Laws in the Handling of Criminal Cases Involving Illegal Fund Payment and Settlement Business and Illegal Foreign Exchange Trading (effective 31 January 2019), any illegal foreign exchange trading under the following circumstances is considered as a ‘serious’ violation that risks causing disruption to financial order and is subject to the following criminal penalties:

  • The amount of illegal foreign exchange transaction is a total of RMB 5 million or above.

  • The amount of illegally earned money is a total of RMB 100,000 or above.

The amount of illegal foreign exchange transaction is a total of RMB 5 million or above.

The amount of illegally earned money is a total of RMB 100,000 or above.

What are the criminal penalties involved?

The Criminal Law of the People’s Republic of China (Revised 1997) stipulates that where the circumstances of market disruption are serious, the offender shall be sentenced to no more than five years fixed-term imprisonment and fined no less than one times the amount of illegal gain but no more than five times the amount of illegal gain. Where the circumstances are especially serious, the fixed imprisonment time shall be no less than five years and a fine of no less than one times the amount of illegal gain but no more than five times the amount of illegal gain.

It goes without saying that illegal foreign exchange trading should be strictly avoided. A violation can result in serious criminal penalties; therefore, it is worthwhile to understand the correct procedure for repatriating lawfully earned income in China back home.

If you would like more information about repatriating foreign income or other foreign exchange related matters in China or other related corporate matters, send us an email at talktous@horizons-advisory.com, and we’ll have a Horizons professional contact you.

Horizons Corporate Advisory helps clients solve complex problems, thrive and be inherently responsible in their business activities worldwide. The countries we operate in include Belarus, Belgium, China, Colombia, Costa Rica, Cyprus, Ecuador, France, Germany, Hong Kong, Indonesia, Italy, Lichtenstein, Luxemburg, Macau, Malta, Mongolia, Netherlands, Nigeria, Portugal, Russia, Singapore, Spain, Switzerland (French and German-speaking cantons), Turkey, United Kingdom (England and Wales) and the United States of America.

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